annual report 2014 - gcasgcas // annual report 2014 // the financial audit process agree the first...

2014ANNUAL RepoRt

Silver Spring, Maryland, USAPresented at Annual Council 2015

The Financial Audit Process

We believe in being faithful stewards of God’s resources and demonstrate this by delivering to our clients the highest quality service at the lowest possible cost.

We now invite you to explore the aspects of our financial audit process.

This is a GCAS publication.

This material may be translated, printed, or photocopied by any Seventh-day Adventist entity without securing further permission. Republished document must include the credit line: General Conference Auditing Service, used by permission.

© 2015 General Conference of Seventh-day Adventists 12501 Old Columbia Pike, Silver Spring, MD 20904, USA

Layout: Ludi Leito Photos: ShutterStock.com

Table of Contents

Director’s Message Our Shared Mission & Values

Our Responsibility & Client Base Our Resources

GCAS Area Offices Work Plan Results Analysis and types of Reports Emerging Issues Only Through Teamwork

35791113151921

Paul H. Douglas, MBA CPAGCAS Director

Jack L. Krogstad, PhD CPAGCAS Board Chair

Director’s Message

As a ministry of the Seventh-day Adventist Church, GCAS is committed to serving the needs of our clients and enhancing the confidence of their stakeholders. Guided by solid leadership and strong ethics, we hold ourselves to the highest professional standards related to our work and expect the highest professional performance from our people. Our ministry is an integral part of the corporate stewardship embraced by the Seventh-day

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Adventist Church and we are committed to serving God by delivering excellent audit services with a global team of people who have the right aptitude and right attitude to make this happen. GCAS uses a financial audit process that is based on the latest professional standards and includes six phases that assures delivery of excellence on every engagement. With a commitment to Christian Service, we apply this six-phase audit process as an expression of our values of Integrity, Respect, Professionalism and Efficiency. Throughout our report we weave a thread of information related to the six-phase process for your consideration. Our 2014 Annual Report provides an insight on our professional activities by presenting the summarized results of audit engagements performed from office locations around the world. These results were shared in detail to Church leaders and their constituent stakeholders as a part of administering their respective organizations.

A special thank you is extended to our approximately 275 professionals operating from offices in 45 different countries who make Delivering Excellence our signature everyday!

GCAS // ANNUAL Report 2014 //

MissionOur Shared

service

We each share a personal commitment to Christian Service. Our attitude and actions incorporate Integrity, Respect, Professionalism, and Efficiency.

We each embrace these values enabling us to deliver excellence!values

Our Shared

Integrity

Respect

Professionalism

Efficiency

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— by moral and ethical principles which are reflected in our conduct.

We are guided

—God by humbly dedicating ourselves to Him.—our clients by valuing their opinions, understanding their needs, and supporting their mission.—our colleagues by valuing their contributions, understanding their needs, and supporting their professional growth.—our profession by applying its standards and best practices.

We respect

— a culture of helpfulness and courtesy by our attitude.— our core competencies through a commitment to

continuous learning and obtaining the highest level of professional qualifications.

— our system of quality control to ensure our work complies with professional standards.

— to communicate valuable information in an effective manner.

We demonstrateWe develop

We design

We determine

— to conserving church resources by providing the highest quality audits at the best economical value.

We are committed


The Financial Audit Process

AGREE

The first step in the audit process is the engagement letter. This letter defines the relationship between GCAS and its client. It covers the terms and conditions of the audit, outlines constraints and deadlines, and explains what the audit can and cannot do.

Our responsibility

Client Base—The General Conference Auditing Service

serves as the Seventh-day Adventist Church’s preferred

provider of assurance and related services. The client

base includes all denominational organizations such

as General Conference institutions, world divisions

and their institutions, unions/union of churches and

their institutions, local conferences/missions/regions/

field stations and their educational institutions at the

secondary level or higher, and Adventist Development

and Relief Agency country offices and projects not

audited by external auditors.

General Conference Working Policy SA 05 25

Our Client base

11.8%

2.9%

4.8%

6.7%

6.7%

31.9%

29.1%

5.6%

0.6%

Other

Trust Opera8ons

ADRA En88es

Publishing Houses/ABCs

Healthcare Ins8tu8ons

Educa8onal Ins8tu8ons

Conferences/ Missions

Unions

Divisions

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OBTAIN

The next step in the process focuses on

gaining a more thorough understanding of our

clients and evaluating the effectiveness of internal control. This step must

be rigorous in order to gather and verify all

key control procedures, documentation, and transactions that are

related to the financial reporting process.

Our resources

The engine for delivering excellence is fueled by an

appropriation received from the General Conference and

revenue we receive from billing our services to clients

to recover costs. The appropriation received from the

General Conference represents 6.5% of its world budget

and is used to provide subsidies for the costs of audit

engagements outside of North America. The remaining

costs that are not subsidized are passed to the respective

world divisions where our work is being performed and

represents their share of the cost for the audit program

being delivered in their territory.

We provide these services with a highly qualified

team, which is diverse in its composition and

dedicated to the commitment of obtaining the

highest professional qualifications.

Female 26%Male 74%

Human Resources Professional Certification Certified 63%Non-Certified 37%

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North American Area

959

1325

152

119

UnionsConferences/MissionsEducational InstitutionsHealth Care InstitutionsPublishing/ABCsADRA OfficesOther

Associate Director: Robyn W KajiuraMaryland, USA

Trans Euro-Asia Area

3914822916264198


Associate Director: Sandra C GriceSt. Albans, England

Trans America Area

3821211827689

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Associate Director: Rogelio CortezFlorida, USA

Trans Africa Area

2815112866323743


Associate Director: Furaha MpozembiziAbidjan, Cote d’Ivoire

Trans Asia Pacific Area

1610813542142249


Associate Director: Paul J EdwardsWahroonga, Australia


ASSESS

55%

15%

2%

28%

Completed In Progress Postponed Not A7empted

WOrk Plan results

Identifying and assessing the risk of misstatement due to error or

fraud in the financial statements is the third step in the financial audit process. This step in the

process also evaluates and reports on how the client responds to

managing or addressing that risk.

PERFORM

The fourth step in the process involves gathering evidence to support whether the financial

statements our clients prepare are free of any material misstatement.

It is in this step that a clear connection can be seen between

the procedures the auditor performs and the overall risk

assessments that have been made in the previous step.

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analySiS Of reports

CONCLUDE

After the evidence has been gathered, reviewed and assessed,

the auditor then formulates an opinion on the fair presentation of

the financial statements.

Most frequent reasons for a non-standard Opinion on Financial Statements:• Lack of evidence due to un-reconciled inter-

organizational balances• Unable to verify accounts receivable balances• Lack of audit evidence due to the overall state of

the accounting records• Misstatement due to inadequate provision for

doubtful accounts• Misstatement due to assets not recorded in

financial statement• Unable to verify income• Lack of evidence due to inadequacy of

inventory records

Most frequent reasons for a non-standard Policy Compliance Report:• Required conflict of interest statements not signed• Lack of required Audit Committee

• Not submitting financial statements to governing board or management as required

• Service records not completed and up-to-date as required

• Not insuring property as required• Not budgeting to recover prior loss

Most frequent reasons for documenting internal control weaknesses:• Lack of adequate segregation of duties• Inadequate reconciliation procedures for

inter-organizational accounts• Lack of authorization for transactions• No evaluation of collectability of

accounts receivable• Management override• Lack of review of general ledger• No process to prepare financial

statement disclosures

REPORT

After the appropriate opinion has been determined a report is then drafted, reviewed, issued, and presented to the management of our clients and their respective audit committees. This represents the final step in the financial audit process and completes our important role in ensuring that the cycle of credibility continues without interruption.

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21%!

79%!

Standard Non-‐Standard

61%!

30%!

1%!

8%!

Standard/Unqualified Qualified Adverse Disclaimer

OPiniOns rendered On Financial stateMents

rePOrts issued On policy coMpliance

Standard/Unqualified The auditor concludes that the overall financial

statements are fairly presented.

QualifiedThe auditor concludes that the overall financial

statements are fairly stated except:

• they contain a misstatement that is not pervasive,

or

• the auditor was unable to obtain sufficient audit

evidence to determine whether there may be a

material misstatement, but confident that any

potential misstatement is not pervasive.

AdverseThe auditor concludes that the financial statements

are materially and pervasively misstated.

DisclaimerThe auditor declines from rendering an opinion on

the financial statements because auditor is unable

to obtain sufficient audit evidence and potential

misstatements could be both material and pervasive.

tyPes Of POliCy

coMpliance reports

Standard/UnqualifiedThe policy compliance report does not

mention any instances of non-compliance with

denominational policy.

QualifiedThe policy compliance report does mention

instances of non-compliance with denominational

policy.

tyPes Of opinions

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emerging issues

Accounting for LeasesThe International Accounting Standards Board (IASB)

continues to re-deliberate a 2013 proposed change to the

required accounting for leases in response to the feedback

about the proposal’s complexity. Under existing standards,

a majority of leases are not reported on a lessee’s balance

sheet. The proposal required a lessee to recognize assets

and liabilities for the rights and obligations created by

leases of more than twelve months, thereby causing

most leases to be reported on a lessee’s balance sheet.

This proposal also provided two methods to recognize the

expense, depending on whether the underlying asset was

equipment or real estate.

Revenue RecognitionIn May 2014, the IASB established a single, comprehensive

framework for revenue recognition to be applied

consistently across all types of transactions, and industries.

This framework will improve comparability of financial

statements. The core principle of the framework is that

an entity should recognize revenue when the transfer of

goods or services to the customer occurs, in an amount

that reflects the consideration to which the entity expects

to be entitled in exchange for those goods or services. The

original effective date has been deferred until January 1,

2018, so that additional clarification can be provided.

Conceptual FrameworkIASB issued an exposure draft in 2015 as part of a project

to provide a complete and updated conceptual framework

to use when it develops or revises International Financial

Reporting Standards (IFRSs) and to help others better

understand and apply IFRS. The IASB plans to finalize the

revision of the conceptual framework in 2016.

Auditor’s ReportIn January of 2015, the International Auditing and

Assurance Standards Board (IAASB) issued new and revised

standards, designed to significantly enhance the auditor’s

reports for users of financial statements. These standards

require certain additional information to be included in

the auditor’s report. This includes the reporting of the

most significant matters during the audit to be reported as

“key audit matters,” the appropriateness of management’s

use of the going concern basis of accounting, improved

description of the responsibilities of the auditor, and the

name of the engagement partner. The new and revised

auditor reporting standards will be effective for audits

of financial statements for periods ending on or after

December 15, 2016.

Financial Oversight The denomination is developing an additional level of

financial oversight to supplement financial audits, financial

reviews, and local church audits. This new level of financial

oversight will be referred to as a financial inspection and

is intended to be suitable for smaller and less complex

organizations for which a higher level of service would be

out of scale with the associated risks.

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Our ministry is an integral part of our corporate

stewardship and we are committed to serving God

by delivering excellent audit services to the Seventh-day

Adventist Church.

Summary

Only thrOugh teaMwork

Leadership Team

Director

Professional Standards

Professional Development

Process Improvement

Quality Control

Technology

North America Area

Trans Africa Area

Trans America Area

Trans Asia Pacific Area

Trans Euro Asia Area

Board Members 2010- 2015

NAD Lay Representative

GC Vice President

GCAS Director

GC President

GC Secretary

GC Treasurer

ECD Lay Representative

ESD Lay Representative

EUD Lay Representative

IAD Lay Representative

NSD Lay Representative

SAD Lay Representative

SID Lay Representative

SPD Lay Representative

SSD Lay Representative

SUD Lay Representative

TED Lay Representative

WAD Lay Representative

Paul H Douglas, MBA CPA

Daniel E Herzel, BA CPA

Maurine Wahlen, MBA CPA

Jeremy T Smith, BA CPA

Kimberly J Westfall, BBA CPA

Gary B Blood, BS MCP

Robyn W Kajiura, BBA CPA

Furaha Mpozembizi, BCom CA ACCA

Rogelio Cortez, BBA CPA

Paul J Edwards, BBA CPA FCCA

Sandra C Grice, BS CPA FCCA

Jack L. Krogstad, PhD CPA, Chair

Lowell C. Cooper, MDiv MPH, Vice Chair

Paul H. Douglas, MBA CPA, Secretary

Ted N. C. Wilson, PhD

G.T. Ng, PhD

Robert E. Lemon, MBA

Vincent Zirimwabagabo, B.Com

Svetlana Kara, CCIM

Elvira Grosu, ACCA

Hyden Gittens, M.Sc, CPA

Yungsang Oh, M.Sc, CPA

Ailton Dorl, MBA

Philip Ndlovu, B.Sc, CA

Evelyn Will, BA

Lotie Blondo, MPA, CPA

John Stanley, PhD

Frensly Panneflek, MBA, M.Sc

Philip Maitanmi, CA

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12501 Old Columbia Pike | Silver Spring, MD 20904www.gcasconnect.org

Delivering Excellence!

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